CORRECTED-INTERVIEW-Egypt currency has further to fall - business leader

February 18, 2013|Reuters

(Corrects name of consultancy in 20th paragraph to ExclusiveAnalysis)

* Muslim Brotherhood business boss expects more depreciation

* Malek says economy won't collapse, sees recovery afterelections

* Malek says working on return of exiled millionaires

By Paul Taylor

CAIRO, Feb 17 (Reuters) - Egypt has begun devaluing itscurrency to help revive the economy and meet the conditions ofan expected IMF loan and the depreciation has further to go, abusiness leader in the ruling Muslim Brotherhood said on Sunday.

Hassan Malek, chairman of the Egypt Business DevelopmentAssociation and a senior informal adviser to President MohamedMursi, told Reuters the government had begun steps to cut thebudget deficit and stabilise the country's finances, but toughermeasures would have to wait until after parliamentary electionsexpected in April.

"We have started already some increase in taxation, andthere is the devaluation of the pound and we raised some pricesof petrol and gas," Malek said in an interview.

"Normal people in the street now understand that there is aprice that we will have to pay for the IMF agreement."

Asked whether he expected a further depreciation of theEgyptian currency to help exports and tourism, he said: "I'm notof course a technical (expert) but people expect a little bit ofdevaluation in the future."

Malek stressed he was speaking in a personal capacity andnot on behalf of the government or the governing IslamistFreedom and Justice Party.

The Egyptian pound has lost some 8 percent against thedollar since the start of the year and a black market has sprungup with the local currency being traded at more than 7 pounds tothe dollar, compared to an official rate of 6.73.

Foreign exchange bureaux are overwhelmed by demand fordollars which are in short supply due to political turmoil.

Malek said the economy was going through a very difficultperiod because the transition to democracy launched by the 2011uprising that toppled former President Hosni Mubarak was not yetcomplete and institutions were not working fully.

"ECONOMY WON'T COLLAPSE"

Political turmoil has severely hit tourism, a major foreigncurrency earner, and many wealthy Egyptians are keeping theirmoney abroad rather than investing in their country.

"The Egyptian economy is not going to collapse," he said."The real problem is the delay in building constitutionaldemocratic institutions. That's why the present government feelsit is temporary and of course we know we are in a transitionalperiod."

Malek said he hoped Egypt could conclude a long-delayed $4.8billion loan agreement with the International Monetary Fundbefore the election, although sensitive measures such as cuts insubsidies should be implemented gradually.

Malek, who was imprisoned under Mubarak with top MuslimBrotherhood leader Khairat el-Shater, his friend and businesspartner, said he was actively trying to persuade wealthyEgyptians to return and invest in the country.

Asked if he was personally involved in trying to persuadebillionaires who have left Egpyt and had their assets frozen orbeen convicted of economic crimes to come home, he said "Yes. Iam inviting everyone to come to Egypt. It is very important toprioritise legislation and court cases should be solved first...before these people come back."

Malek confirmed he was in contact with former Mubarak-eratrade minister Rachid Mohamed Rachid, a respected liberaleconomist and businessman who fled to the United Arab Emiratesduring the uprising, and would like him to return to Egypt.

Rachid was sentenced to five years in jail and fined $1.57million in absentia in 2011 for profiteering and squanderingpublic funds. Several such sentences have recently been annulledon appeal and retrials ordered.

Asked about his contacts, Malek said : "It is a personalinitiative with the coordination of the authorities. But it'snot my decision (whether or not to pardon Rachid). The decisionin the end is for the court and the government."

Asked whether all big businessmen were welcome to returnregardless of the roles they played in the Mubarak era, he said:"I have no personal opposition towards any person... if theirdebts and obligations are first fulfilled."

Malek said his organisation was also trying to broker asolution to Cairo's debt to foreign energy companies producingoil and gas in Egypt such as BP, Gas Natural, Petronas, Shelland Dana, that has accumulated since the 2011 uprising.

He disputed the figure of $9 billion cited by consultancyExclusive Analysis and European diplomats for the total energydebt, saying it was far less, but declined to give a number.

"Some of their contracts needed to be reviewed because theywere not balanced to cover both the national interest and thecompany interest. So some licences were suspended when theyexpired, which made a bit of a problem," Malek said.

"We tried to encourage them by giving them more concessionsand rescheduling these payments (owed by Egypt). We opened otheropportunities in the same field such as refineries and otherprojects they can take. Up to this moment, none of thesecompanies has decided to leave," Malek said.

He acknowledged that most foreign energy companies werestill holding back on new investments in Egypt. "They want tosee these problems tackled first. They want to see a clear roadmap, which is normal in such an environment."